NaBFID Plans $1.5 Billion Overseas Bond Debut
India's NaBFID seeks $500 million in 10-year bonds and $1 billion in 15-year paper, marking its first entry into global markets.
Key points
- NaBFID plans to raise $500 million via a 10-year bond and $1 billion via a 15-year MIGA-backed bond.
- The RBI's 1.5% annual swap facility lowers hedging costs for eligible dollar-denominated debt.
- Bank of Maharashtra's recent $500 million bond carried a 6.112% coupon, aligning with domestic rates after swap costs.
NaBFID aims to raise $1.5 billion through its first overseas bond issuance. The plan includes a $500 million ten-year tranche and a $1 billion fifteen-year bond. This marks the institution's debut in the international debt market. The move targets a total of $4 billion in dollar funding by December.
A company executive confirmed the $500 million indicative amount for the ten-year issue. The fifteen-year tranche involves discussions with the Multilateral Investment Guarantee Agency. MIGA may provide a guarantee to support the longer-term borrowing. This structure helps NaBFID access funding suited for long-gestation infrastructure projects.
Swap Facility Reduces Hedging Costs
The Reserve Bank of India launched a concessional swap facility in June. This tool lowers hedging costs for eligible overseas borrowings. The annual swap cost stands at 1.5 percent for qualifying debt. Drawdowns under this facility are permitted until December 31.
Bank of Maharashtra recently issued $500 million in five-year dollar bonds. The coupon was set at 6.112 percent over US Treasuries. Adding the 1.5 percent swap cost brings the effective rate to 7.6 percent. This figure aligns closely with current domestic borrowing costs for similar lenders.
Yield Shifts Narrow Cost Savings
Rising US Treasury yields have reduced the advantage of dollar borrowing. Two months ago, savings from overseas issuance were substantial. Now, the cost is slightly cheaper than domestic rates. The final pricing depends on prevailing yields and the credit spread.
TradingView reports that NaBFID is mixing loans and bonds to meet its target. The external commercial borrowings are part of this broader strategy. The institution seeks to diversify its funding sources. This approach supports its mandate to finance national infrastructure development.
